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THE MINISTRY OF FINANCE

CIRCULAR No.44-TC/TCDN OF JULY 8, 1997 PROVIDING GUIDANCES FOR HANDLING EXCHANGE RATE DISPARITIES IN STATE ENTERPRISES

In furtherance of Decree No.59-CP of October 3, 1996 of the Government promulgating the "Regulation on Financial Management and Business Cost-Accounting Applicable to State Enterprises," the Ministry of Finance provides the following guidance for handling foreign exchange rate disparities in State enterprises:

I. GENERAL PROVISIONS

1. In this Circular, the following terms shall be construed as follows:

1.1. Foreign currency is any currency other than Vietnamese "Dong".

1.2. Foreign currency operations are activities of collection and payment in foreign currency(ies) that are expressed in current accounting and used for calculating prices.

1.3. Foreign exchange rates are rates applicable to the exchange between two different currencies (hereafter referred to as the exchange rates).

1.4. Foreign exchange rate disparity (hereafter referred to as the exchange rate disparity) is the difference between the exchange rate recorded in the book of accounts and the exchange rate at the time of adjustment of the same foreign currency.

2. State enterprises engaged in foreign currency operations shall conduct an accounting of exchange rate disparities in accordance with the provisions of the current accounting procedures.

The exchange rates for converting balances dominated in foreign currency(ies) into Vietnam "Dong" at the end of an accounting period are the rates officially announced by the State Bank of Vietnam at that moment.

3. All foreign currencies for which the State Bank of Vietnam does not announce the exchange rates for their conversion into Vietnam "Dong" shall be converted through the US dollar.

II. HANDLING FOREIGN EXCHANGE RATE DISPARITIES

1. Resolving exchange rate disparity of foreign currency operations within the accounting period

The exchange rate disparity that is incurred within the accounting period and cleared between the increase disparity and the decrease disparity (excepting Point 1.4 below), shall be resolved at the end of the fiscal year as follows:

1.1. For the period of investment and construction preparation, in which the enterprises have not commenced their operations or the projects have not been completed for hand-over, the accumulative exchange rate disparity up to the time of completion of the projects shall in:

- Instances of exchange rate variety increase (credit balance on account No. 413), shall be equally accounted into the financial revenues of enterprises for a period of five years or more from the time of operation of the projects.

- Instances of exchange rate disparity decrease (debit balance on account No.413), shall be equally accounted into the financial expenditures of enterprises for a period of five years or more from the time of operation of the projects.

1.2. For the period of production and business operation of the enterprises:

- Instances of exchange rate disparity increase shall be accounted into the financial revenues within the accounting period.

- Instances of exchange rate disparity decrease shall be accounted into the financial expenditures within the accounting period.

1.3. The period of dissolution and liquidation of enterprises:

- Instances of exchange rate disparity increase shall be accounted into the revenues from the liquidation of enterprises.

- Instances of exchange rate disparity decrease shall be accounted into the expenses for the liquidation of enterprises.

1.4. An exchange rate disparity within the accounting period resulting from the purchase and/or sale of foreign currencies shall be directly accounted into expenses on or revenues from financial activities.

2. Handling exchange rate disparity resulting from the re-evaluation of foreign currency balance at the end of the accounting period

At the end of the accounting period, the enterprises shall have to convert the balance of cash, deposits, deposits in transit, accounts receivable and accounts payable originally dominated in foreign currencies into Vietnam "Dong" according to the exchange rate stipulated in Point 2, Section I of this Circular. Any disparity between the post-conversion exchange rate and the one expressed in the accounting book shall be handled as follows:

2.1. The exchange rate disparities resulting from the year-end re-evaluation of balance of cash, deposits, deposits in transit and short-term debts (one year or less) originally dominated in foreign currencies at the time of making financial statement shall not be accounted into expenditures or revenues, but such balance shall be left in the financial statement and deleted upon the beginning of the next year after the entry reversion.

2.2. The exchange rate disparities resulting from the year-end re-evaluation of the balance of long-term debts (more than one year) originally dominated in foreign currencies at the time of making financial statement shall be handled as follows:

a/ For receivable long-term debts

- In cases where the exchange rate for converting the balance at the end of an accounting period is higher than that expressed in the accounting book, the exchange rate disparity shall be handled as stipulated in Point 2.1, Section II.

- In cases where the exchange rate for converting the balance at the end of an accounting period is lower than that expressed in the accounting book, the exchange rate disparity shall be accounted into the financial expenditures during the year.

b/ For payable long-term debts

- In cases where the exchange rate for converting the balance at the end of an accounting period is higher than that expressed in the accounting book, the exchange rate disparity shall be accounted into financial expenditures of the year.

- In cases where the exchange rate for converting the balance at the end of the accounting period is lower than that expressed in the accounting book, the exchange rate disparity shall be handled as stipulated in Point 2.1, Section II.

When liquidating receivable or payable long-term debts, if the actual payment exchange rate is higher or lower than that expressed in the accounting book, the exchange rate disparity shall be handled as stipulated in Point 1.2, Section II of this Circular.

III. IMPLEMENTATION PROVISIONS

1. This Circular takes effect from the date of its signing. All previous stipulations on the financial settlement of foreign exchange rate disparities in the State enterprises, which are contrary to this Circular, are now annulled.

2. This Circular shall not apply to enterprises specialized in the foreign currency trading business.

3. Any problems arising in the course of implementation of this Circular must be reported to the Ministry of Finance for consideration amendments or supplements.

For the Minister of Finance

Vice Minister
PHAM VAN TRONG